Firm Puts Chance of Fed Appeal of Durbin Ruling at 65%-70%

An update from financial research firm Keefe, Bruyette & Woods puts the chance of the Federal Reserve appealing a ruling against its debit interchange regulation at between 65% or 70%.

On July 31, U.S. District Court Judge Richard Leonthrew out two thirds of the Federal Reserve's debit interchange regulations that were authorized by the Durbin Amendment.

The firm said that, in at least this matter, the Justice Department would litigate for the regulator and may not appeal the decision because it perceives the agency's position to be a weak one.

“The primary reason the government might decline to appeal is that the government thinks it has a weak case and is reluctant to dedicate limited resources of the Justice Department to an appeal,” the firm's analysts wrote.

On the other hand, the analysts wrote that the biggest reason the government might want to appeal Leon's decision would be to protect the Fed's ability to interpret laws that it must enforce.

Should the Justice Department or Federal Reserve choose to appeal, the agency will have 60 days from July 31 to decide, the firm said.

The analysts also predicted that the hearing set for Aug. 14 in Leon’s courtroom will address how long the Federal Reserve should be given to come up with a new set of debit regulations and how it should do so.

The firm did not predict Judge Leon's course, but estimated that between the time to develop new regulations and then implement them, there could be a full 18 months until a new regulation takes effect.